Recording supplies and identifying their effect on financial statementsWayne Dunn started...

Recording supplies and identifying their effect on financial statements

Wayne Dunn started and operated a small family architectural firm in 2011. The firm was affected by two events: (1) Dunn provided $25,000 of services on account, and (2) he purchased $6,000 of supplies on account. There were $500 of supplies on hand as of December 31, 2011.

Required

a. Open T-accounts and record the two transactions in the accounts.

b. Record the required year-end adjusting entry to reflect the use of supplies.

c. Record the preceding transactions in a horizontal statements model like the following one:

d. Explain why the amounts of net income and net cash flow from operating activities differ.

e. Record and post the required closing entries, and prepare an after-closing trial balance.